I wrote in my FT column about Sir Martin Sorrell of WPP, whose remuneration was rejected by 60 per cent of shareholders on Wednesday, and the fact that most CEOs demand to be paid at least as much as their rivals.
That leads to the steady ratcheting up of pay that has enraged UK investors in this year’s “shareholder spring”.
But one aspect of companies such as Barclays and WPP, home to the two highest-paid UK chief executives, is less noticed. It is that the bosses of investment banks and marketing groups tend to compare themselves not just to outsiders, but to the people within their organisations.
Investment banks such as Barclays Capital, employ traders and bankers who earn more than their CEOs, but are invisible because they are not on the board, and so their pay remains secret. Bob Diamond, Barclays’ chief executive and the former head of the investment bank, is the public target.
Similarly, WPP and other marketing companies are agglomerations of small advertising, marketing and PR brands that used to be partnerships and whose senior employees are richly rewarded – again away from the public gaze.
Sir Martin noted in his FT oped last week that incentive pay is widely spread across his organisation:
“We have to ensure that WPP remains an entrepreneurial, performance-based company to maintain its global leadership. That is why we target an incentive pool of 15-20 per cent of our operating profits before bonuses and taxes for distribution to our top-performing people. Last year that totalled more than $500m, a just reward for record performance.”
It is no coincidence that Sir Martin and Mr Diamond top the league table of UK executive pay – they are trying to keep up with their underlings.